The Government has released guidance on how Companies House will use its enforcement powers for non-compliance with the rules regarding the Register of Overseas Entities (RoE). Please see our previous article for information on the requirement for an Overseas Entity (OE) to register and their obligation to submit updated statements annually. Please see our article on The Register of Overseas Entities ongoing requirements here.
Non-Compliance
In the first instance, Companies House will encourage OEs to register. This will include sending letters and email reminders to the OE and/or property address. The following factors will be considered before penalties are issued for failing to comply:
- the risk posed to people and the economy
- the seriousness of the breach of the law
- the impact on the economy, people, or the integrity of the register
- the cost and benefit of taking enforcement action and whether it is in the public interest
Companies House will particularly focus on whether an OE has consistently been non-compliant.
Whilst Companies House will have the power to prosecute, it appears this will only be considered in the most serious cases. There is currently no guidance as to what constitutes a “serious case”, although previous non-compliance would appear to be a starting point.
Financial penalties
It is more likely that a financial penalty will be issued than prosecution. This can be a fixed penalty, a daily rate penalty or a combination of the two. In some cases, the registrar may issue a warning notice to the OE stating that they believe an offence may have occurred and the steps that now need to be taken. The OE will have 28 days from the date of the notice to liaise with Companies House, who in turn will consider any evidence put forward by the OE. They will then decide whether an offence has been committed and whether penalties should apply.
In deciding the level of fine, Companies House will consider the “culpability and harm” of the OE whilst also considering previous conduct. The size and value of the OE’s property portfolio will be taken into account.
Companies House will use a variety of ways to value the property portfolio, including using data from council tax bandings, the business rateable value and the House Price Index. The values are then banded into low, medium, and high. At present, values have not been applied to the bands. However, the following penalties are set to apply:
| Property value | Penalty for each property |
| Low | £10,000 |
| Medium | £20,000 |
| High | £50,000 |
Mitigating factors and appeals
Companies House will consider any mitigating factors and any representations that have been made by the OE, including their ability to pay a fine. The registrar will have the power to revoke any penalty issued, but this will be considered on a case-by-case basis only. Failure to contact Companies House will result in automatic acceptance of both the ability to pay the penalty and acceptance of the property/land valuation for penalty banding purposes.
If a penalty is issued, an OE may appeal it if they believe that it is unlawful, unreasonable or there has been procedural impropriety. An appeal may be made by making an appeal to the High Court within 28 days of the penalty notice being issued. The registrar must be notified in writing within 7 days of the application to Court.
Failure to pay the penalty within 28 days of issue may result in enforcement action being taken by the Courts. A charge may also be placed over the property and interest will be charged at the rate of 8% p.a.. Further penalties may be imposed for continued non-compliance.
Next steps
If your OE falls within the scope of the RoE and has not yet been registered, this should be dealt with as a matter of urgency. Where there are mitigating circumstances, these should be flagged to Companies House at the earliest opportunity.
If you have any questions regarding the RoE or the consequences of non-compliance, please contact the TTS Team in London.
